On August 14, WazirX exchange management announced they are ending terms with their former security partner, Liminal Custody, and moving all remaining funds from their custody. This follows the cyber-attack on their multi-signature wallet.
Cyber-Attack and Fund Loss
On July 18, WazirX suffered a cyber-attack resulting in the loss of 45% of user funds. This incident led to the fallout between WazirX and Liminal Custody. However, as of today, 55% of user funds still remain in Liminal Custody’s multi-signature wallets. Liminal has denied all allegations from WazirX, claiming the hack occurred from WazirX’s end.
Accusations and Counterclaims
According to a spokesperson for Liminal Custody, WazirX management has yet to move the remaining user funds despite publicly accusing Liminal of failing to safeguard crypto assets. Liminal asserts that the wallets remain unchanged since before the breach, and that WazirX uses self-custodial wallets, where the majority of the keys (5 out of 6) are held by WazirX themselves. The spokesperson for Liminal stated, "As of today, a significant amount of their fund balances continue to remain in the wallet as they were before the breach. Furthermore as reiterated several times the customer is using Liminal’s self-custodial wallet software and holds majority of the keys (5 out of 6) in their own custody. In these self-custodial wallets, only they can initiate transactions and are also free to move assets without any involvement from Liminal or the Liminal key. We maintain that the Liminal platform remains secure and continues to securely and seamlessly process transactions worth millions."
What’s Next?
The question arises why WazirX has yet to transfer the user funds from Liminal Custody two months after the hack, if they continue to blame Liminal for the failure to prevent the hack. The WazirX management proposed a moratorium in Singapore High Court to distribute the remaining user funds in a socialistic manner, where all users are affected equally. It remains to be seen whether WazirX will remove user funds from Liminal Custody’s wallets given their criticism of the security features.
The WazirX hack and subsequent fallout with Liminal Custody raise numerous questions. Whether an agreement will be reached on fund withdrawal and a solution that satisfies all parties will be found remains to be seen.
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